Reform Update: States debate network adequacy as insurers scramble to submit 2015 products

Washington this week adopted an aggressive new rule addressing network adequacy for insurance products sold both inside and outside the state's exchange. And it's not the only state taking a hard look at network adequacy rules in the wake of the recently completed initial open-enrollment period under the Patient Protection and Affordable Care Act.

Across the country, concerns have surfaced about well-known medical providers being left out of networks. In Washington, for example, Seattle Children's Hospital was absent from many networks. In order to control costs, insurers often sacrificed broad networks for plans that limit access to doctors and hospitals.

The National Association of Insurance Commissioners has created a group to study whether its current model state law for network adequacy needs to be changed.

In New Hampshire, the insurance commissioner held a meeting April 23 to discuss possible ways to strengthen the state's rules for adequate provider networks. Any proposed changes aren't expected to take effect until 2016.

Legislators in Nevada authorized the state's insurance commissioner to regulate provider networks beginning this year. Last month, Nevada officials convened a series of “listening sessions” across the state to solicit public feedback on the issue.

The new Washington rule requires insurers to update provider directories monthly and to clearly explain pricing and referral policies. It sets specific guidelines for including providers that predominantly serve low-income patients in networks.

The rule was adopted despite criticisms voiced by both hospitals and insurers about the potentially harmful effect to the state's healthcare delivery system. It takes effect May 26, meaning plans sold during the 2015 open-enrollment window, which begins Nov. 15, will be subject to the new strictures.

A recently study by Avalere Health found that accessing information about provider networks was difficult or impossible for about a quarter of the plans analyzed in 17 states, a dozen of which are operating their own exchanges.

Elizabeth Carpenter, a director of Avalere's healthcare reform practice, says that's concerning because individuals shopping for coverage might not take access to providers into consideration when choosing coverage. “Consumers on exchanges are extremely price-sensitive,” Carpenter said. “They really are choosing a plan primarily, if not exclusively, based on premiums.”

These state changes are happening against the backdrop of the looming 2015 open-enrollment period. Plans are already submitting products to state regulators for consideration. Some states required initial filings as early as April, but most deadlines fall in May and June.

That means insurers have little time to analyze the demographic and risk profiles of their new customers before submitting proposed 2015 prices and products. That's especially true because so many of the roughly 8 million exchange enrollments occurred in March and April.

“It's an interesting time for health plans participating in the marketplaces,” said Eric Sullivan, vice president for product innovation and data strategies at the healthcare technology firm Inovalon. “They don't have their full gamut of data to work from.”

If the current trend continues, they also may find states restricting their network-building prerogative even more.

Up to 90% of employees who currently receive coverage through their jobs could be shifted to the exchanges by 2020, according to an analysis by S&P Capital IQ (PDF). Federal subsidies provide a huge financial incentive for companies to fundamentally change their approach to providing benefits to workers, the report concludes. Despite financial penalties contained in the law for not offering coverage, companies with 50 or more employees could save $3.25 trillion through 2025.

Spending on outreach efforts to the uninsured varied sharply by state, according to a report by researchers at the University of Pennsylvania. The 16 states and the District of Columbia that operated their own exchanges spent $17.15 per uninsured individual on outreach efforts. That was more than three times the level of spending on outreach efforts in states that relied on the federal exchange for enrollments. But the highest level of spending—$31.53 per uninsured resident—was in the five states (Arkansas, Delaware, Illinois, New Hampshire and West Virginia) that used HealthCare.gov for enrollments, but conducted their own outreach efforts.

Follow Paul Demko on Twitter: @MHpdemko